It can’t always be strictly about dollars and cents.
So while the business case may be shaky, you have to applaudfor learning from past mistakes and preparing to dabble in diesel passenger cars here in the U.S.
Earlier this month, product czar Bob Lutz let slip in his video blog the auto maker indeed plans to offer diesel engines in U.S. cars.
The disclosure marks a reversal of sorts for GM, which in March presented a thorough defense of its position on the opposite side of the coin.
The occasion was the announcement of a new 2.9L V-6 diesel GM plans to produce in Italy with VM Motori for installation in the Cadillac CTS and other models offered in Europe. GM said Monday it would acquire a 50% stake in VM.
When the question came up about the 2.9L’s potential for sale in the U.S., Charlie Freese, executive director-GM Powertrain diesel engineering, was quick with a detailed, data-backed response.
While technically feasible to sell the V-6 in the U.S., Freese said, the cost-benefit equation had convinced GM to concentrate on diesels for pickups and big SUVs first, where the payoff for American consumers comes more quickly.
The problem is diesels cost several thousand dollars more than comparable gasoline engines. And, even given the rising cost of fuel and 25% improvement in mileage, the payback to consumers typically can be three times longer with a diesel-powered midsize car than a light truck.
In addition, Freese said, GM would have to modify the engine with an expensive exhaust aftertreatment system to meet U.S. emissions standards that take effect in 2009 and are six times more stringent than upcoming European regulations.
Finally, the potential demand – highly dependent on where fuel prices settle – appears iffy, certainly nowhere near the 54% penetration Europe enjoys.
But while the case for ignoring the U.S. diesel-car market appeared to make perfect business sense, it sounded an awful lot like the rationale that initially led GM to take a pass on hybrid-electric vehicles.
Because profitability looked dicey at best and demand was highly uncertain, GM watched astook control of the sector with its Prius hybrid, helping convince the public it is the world’s most advanced and environmentally friendly auto maker.
Lutz later confessed GM had been badly outmaneuvered.
“We failed to appreciate thatbasically treated (hybrids) as an advertising expense,” he says. “That’s what we should have done.”
Now the same thing may happen in the diesel market, where rising gasoline prices could fuel demand, and those slow to act not only could miss the curve but risk being viewed as technological and environmental laggards.
In his blog, Lutz notes the business case for passenger-car diesels here hasn’t changed any since Freese so thoroughly laid it out. But the auto maker now plans to at least tiptoe into the field and presumably better position itself in case demand blossoms more fully.
“At best, people have concluded the diesel engine is going to be tremendously expensive,” he says. “(But) we’re going to introduce passenger-car diesels in the U.S. We’re going to have a V-6 diesel engine for (cross/utility vehicles), passenger cars, light-duty trucks, etc.
“I’m just cautioning you, do not assume the diesel is the (fuel-economy) panacea.”
Unlike with hybrids, this time GM is being careful not to assume anything either.